Simple isn’t Necessarily Equitable in Subrogation
Your company takes out ad space on a banner in the town parade, to be carried by kids from the local high school. Although not accounted for in your marketing budget, a flaming baton to be thrown in the air by the marching students burns many spectators who in turn sue your company and the corporation putting on the parade. Now the corporation who sponsored the whole parade is coming to you for compensation claiming this is proper under theories of “equitable subrogation”. What exactly is equitable subrogation, and how might it affect your company’s Health Plan?
Subrogation is derived from one of two basic legal theories. The most common is the conventional contract. Straightforward enough, a party enters into a business association or agency relationship through a contract with a subrogation carrier. The subrogation carrier steps into the shoes of the original party for any/all legal rights and remedies.
The less conventional is what is known as “equitable” subrogation—a legal theory that is a bit more nebulous than a black and white contract but still boils down to the same basic concept: one party who has paid the obligation of another party can assume the legal rights to recover damages from a third party.
Now, the controlling case setting forth the standards of equitable subrogation in the state of Florida is Dade County Sch. Bd. v. Radio Station WQBA, 731 So. 2d 638 (Fla. 1999).
It all began back in 1989 as an employee of Dade County Public Schools (DCSB) purchased some radio advertising as well as a banner for a high school marching band to carry in a parade, and signed a Participation Agreement with Three Kings Parade, Inc. in order to do so. The “majorettes” of Miami Senior High were set to march in the “Three Kings Parade”.
Tragedy Turns to Utility
As all the best marching bands do, the majorettes specialized in twirling batons lit aflame. In the process of lighting the batons, a can of the flammable substance caught fire itself and was kicked into the crowd of spectators, badly burning several individuals. Not the common outcome for a parade, but the event did eventually offer some legal utility. If you’re an attorney with an interest in formative case law, read on. If you are not an inquisitive attorney, feel free to jump to the last paragraph.
In a boiled down explanation of procedure that followed, the injured spectators sued both Three Kings and DCSB under personal injury principles. Liability insurer for Three Kings settled with all injured plaintiffs, while DCSB did the same. Three Kings then sought to be indemnified by DCSB based on the Participation Agreement entered-into by DCSB, legally binding them to repay Three Kings for the damages caused by the band. The two parties went to trial over the indemnity issue, with a jury ruling in favor of Three Kings. Three Kings did not initially plead equitable subrogation as an alternate basis for recovery, waiting to raise issues of equitable subrogation until post-verdict hearing.
Theories of Equitable Subrogation
On appeal, DCSB argued that the common law indemnity verdict was not available due to technicalities of “no special relationship” between the parties, and the District Court agreed. However, the District Court allowed trial court judgment to stand and held that Three Kings was indeed entitled to relief under theories of equitable subrogation.
Petition the Florida Supreme Court
DCSB petitioned the Florida Supreme Court to review the District Court’s ruling on appeal, arguing that equitable subrogation was never initially pled, instead being raised post-verdict. It was here that the Supreme Court laid out the standards for equitable subrogation formally: “Equitable subrogation is generally appropriate where: (1) the subrogee made the payment to protect his or her own interest, (2) the subrogee did not act as a volunteer, (3) the subrogee was not primarily liable for the debt, (4) the subrogee paid off the entire debt, and (5) subrogation would not work any injustice to the rights of a third party.” See, also: Fowler v. Lee, 106 Fla. 712, 714-15 (1932). The case was remanded back to the trial court to determine if DCSB met this five-prong test, which is today the standard of equitable subrogation in Florida.
Moral of the story being, next time you attend a parade just know you may be firsthand witness to the evolution of subrogation theory—as if parades weren’t already enjoyable enough. At Vengroff Williams, subrogation is an artform and having a deep understanding of the intricacies and legal theory is something our attorneys take very seriously. Call us or email today for more information on equitable subrogation, or other health plan related answers.
— Matthew T. McClellan, Esq.
Vengroff Williams, Inc.